It's the best of times for business owners looking to sell
out. Brokers say demand and prices have shot up along with sales
and profits in a strong economy.

Just how much prices for existing businesses are up is an open
question--there are no centralized statistics. But some business
brokers offer insight. Business Brokers Network in Dallas, for
instance, estimates the average price for the 1,000 businesses it
sold last year rose about 10 percent over the prior year, a likely
reflection of prices nationally, says company president Gerrald
Nance. His 450 affiliates sell midsized companies, which last year
had an average price of $400,000 each.

At the lower end of the market, the story is similar. Steve
Benson of VR Business Brokers in Huntington Beach, California,
reports that his company saw an average 9 percent price increase in
businesses sold last year--from $146,000 in 1997 to $160,000 in
1998. (The company declines to disclose the number of sales.) And
at Sunbelt Business Brokers Network Inc. in Charleston, South
Carolina, the average price for businesses sold jumped
substantially more last year--about 23 percent to $185,000. But
president Edward T. Pendarvis explains that the company, which sold
3,000 businesses in 1998, had courted larger businesses than in the
past, thus skewing the numbers upward.

In any case, the price trend is clearly running far ahead of
inflation. Today's stronger business results are increasing
valuations, asking prices and buyers' willingness to ante up,
the brokers agree. But apart from the push by economic
fundamentals, there's another reason prices are going up. Says
Pendarvis, "The main thing driving price increases is
corporate downsizing and the lack of job security--people know
they're not going to be at one company for 30 years and then
retire." Nance agrees, citing a flight from corporate America
into small business over the past five years as a key factor in
increasing demand and therefore higher prices being paid for
existing businesses.

Benson also believes the reduction in long-term capital gains
taxes from 28 to 20 percent has made owners a bit less willing to
hang on. Nance says the tax issue means little at the lower end but
increases in importance with the size of a business. "[Many
entrepreneurs] are unschooled in the details of finance,"
Nance says. "They'll sell when they get burned out, not
because of tax advantages."

Stephen B. Sherretta, a freelance business writer in
Philadelphia, is a former writer and editor with The Economist
Group and the Financial Times in London.

Let's Pretend

Invest online for fun (no cash required).

Ever get the urge to plunk down a wad of cash on a few
"hunch" stocks just to see what would happen? Well, now
you can join the fray at no risk--all for fun.

Since last December, the Fantasy Stock Market site (http://www.fantasystockmarket.com)
has let visitors invest for free an imaginary $100,000 in stocks
from the major exchanges. A new game starts at the beginning of
each month, though you can join at any time.

Cyber investors keep coming back--the number of hits reached
80,000 per day in April. If nothing else, it's a fun way for
beginners to learn about investing--and for would-be tycoons to
learn the vagaries of risk and reward.